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Botswana: CEDA Struggles to Recover Loans
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Mmegi/The Reporter (Gaborone)
28 March 2008
Posted to the web 31 March 2008
Mogomotsi Moloi
Gaborone
After almost seven years of operation, the Citizen Entrepreneurial Development Agency (CEDA) continues to struggle in collecting loans from its clients.
CEDA is a government financial institution supporting viable and sustainable citizen businesses through loans at subsidised interest. The organisation's research and public relations manager Oabile Regoeng said that they have a problem of low loan repayment and high operational costs. Part of the problem is poor performance by some of the businesses, due to competition in the small local market.
"As you might be aware, most of the businesses funded by CEDA fall within the Small Medium Micro Enterprises (SMME) category and they still lack the ability and know-how to competitively access the export markets. As a result, the majority of them have to compete for a share of the small domestic market. This situation is further exacerbated by cross border competition, and the current unfavorable procurement procedures and terms, which make it difficult for them to win any government agency tender," he explained. He pointed out that compared to the past, there is a slight improvement in the level of loan repayment which stands at an average of 67 percent of the agency's expected collections.
He indicated that they have not received any funding from government for the past three years. CEDA is depending on a revolving fund. Regoeng is confident that the agency will continue to enforce its credit policy procedures and rules to recover loans as well as to sensitise borrowers about the importance of servicing loans and the danger of defaulting.
Regoeng noted that the Local Enterprise Authority (LEA) recently issued a tender on the evaluation of government procurement procedures and the Small Business Council (SBC) and is also working on a study on government regulations. He stated that while CEDA believes competition is inevitable and important in business, they hope the initiatives undertaken by LEA and SBC will attempt to address the constraints. He said the issue of not meeting the required quality standard and high price was raised as part of the problem faced by some local buyers. CEDA believes that as companies continue to heed Botswana Bureau of Standards' (BOBS) call to produce quality products and services, the issue of quality will be resolved over time.
Despite all the challenges, Regoeng expressed satisfaction that CEDA is on the right track in delivering its mandate. He said the introduction of CEDA, with its many services, has provided a window of opportunity for easy access of funds and entrepreneurial services. Consequently, this has encouraged a proliferation of new citizen businesses and expansion of existing ones.
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Meanwhile, after the inception of Young Farmers Fund last year, 186 applications have been received worth P69 million. Up to 49 projects costing P18.2million have been approved, said Regoeng. He revealed that 44 projects worth P16 million were rejected because of lack of viability and 93 projects worth P34.9 million are being considered. Most of the approved projects under the fund are still at the implementation or disbursement stage.
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